INTRODUCTION
The price of goods and services increase, with some exceptions, in an economy over time. A general increase in prices is called inflation. An Industry may produce the same amount of physical Output in two different years, but its dollar value can vary due to inflation, complicating year-to-year comparisons. To make analyses consistent, converting the values of inputs to like-dollars as the Data Year being utilized in a Project is required. In IMPLAN, this conversion process is handled automatically through the use of Deflators.
OVERVIEW OF DEFLATORS IN IMPLAN
A Deflator is a metric used to convert values expressed in nominal dollars (not adjusted) to real dollars (adjusted). A deflator is merely a numeric value which is calculated by dividing nominal GDP by real GDP, and then by multiplying the resulting quotient by 100. The written mathematical formula for this calculation is:
GDP deflator = (Nominal GDP) / (Real GDP) x 100
IMPLAN's Deflators are indexes of inflation, with the deflator for the model Data Year set at 1.00. Output Deflators are specific to the Industry or Commodity specified and are applied to the Output value. GDP Deflators are the same for every Industry or Commodity specified and applied to the Value-Added components.
When a Dollar Year is set to a year other than the Data Year in IMPLAN, a deflator will be applied to the values converting them to like-dollars with the Data Year. The analyst needs only decide which Data Year and Dollar Year most accurately represents the scenario being modeled. You may read more about Deflators and how they work in IMPLAN by reading the article Deflators.
For example, let’s say we want to model an Industry Output Event for Industry 1 - Oilseed farming in North Carolina with an event value of $1 million in 2025 dollars and Data Year 2023. Before applying multipliers, IMPLAN will need to convert the $1 million into 2023 dollars by applying a Deflator specific to Industry 1. IMPLAN will divide the $1 million by its Industry deflator of 1.02937736 yielding a value of $971,461. This is the real value, expressed in 2023 dollars. If this conversion step were skipped and $1 million were applied to the multipliers instead of the deflated value, the Results would be overestimated and inaccurate.
One common misconception is that changing the Dollar Year forecasts future and past Output values. We must emphasize this is not the case. IMPLAN is applying inflationary/deflationary changes to monetary input values to convert them to real values. Forecasting involves estimating changes in production.
Another misconception is changes in Dollar Year, converts Employment. Employment is calculated independently of the Dollar Year. Deflators only adjust monetary values, not Employment.
SETTING DEFAULT DOLLAR AND DATA YEAR IN IMPLAN
In IMPLAN, Dollar Year defaults to the current year and the Data Year defaults to the most recent year available in the Industry Data Set, unless changed by the user. Users may change this in their User Preferences. User Preferences may be accessed on the IMPLAN Dashboard by clicking on the User Profile avatar on the top right. Once open, select Profile.
This will open the User Preferences page. Here users will see default settings for Data Year and Dollar Year among other default options.
To change the default Data Year or Dollar Year, click on the drop down arrow which will open up a list of years to choose from. Select a year and click Save. Please note the 2023 Data Year is only available for the 528 aggregation scheme. All previous Data Years (2001-2022) will require the use of the 546 Industries Set until the release of the updated IMPLAN 528 Industry Set time series data (coming in 2025).
The Data Year and Dollar Year set in User Preferences will be the default Data Year and Dollar Year on the Impacts page. Additionally, the chosen default Dollar Year will also be the default Dollar Year on the Results page. To learn more about default settings you can read our article User Preferences.
ACCOUNTING FOR INFLATION IN AN ANALYSIS
In order to properly account for inflation in an analysis, the user must understand whether or not inflation has been included in their input values. The first step in accounting for inflation in an analysis is to set up the Group Data Year and Dollar Year. This is accomplished within the IMPLAN Project’s Impacts page, either before or after a Region has been selected. The Group(s) will be located in the panel on the right. To change the Dollar Year and/or Data Year, click on the drop down arrow to open up a list of years available to choose from.
GROUP DATA & DOLLAR YEAR SELECTIONS
Data Year is the year of the dataset the Project is using to estimate the economic effects of the modeled activity. All the Region details, Multipliers, etc. will be based on the economy as it existed for the Data Year selected. The Data Year chosen in most cases should be the year the event occurred.
It is important to note the latest Data Year available in IMPLAN lags behind the current calendar year by approximately one year. If the event is occurring in a year after the latest available Data Year, set the Data Year to the most recent Data Year available, as this selection will still most accurately represent the economy based on current data.
The Group Dollar Year is the year represented by the monetary values of the Event(s) included in the Group. This is usually, but not always, the same as the year in which the Event occurred or is expected to occur. For example, if the values for a project are in 2025 dollars then the Group Dollar Year should be set to 2025.
If the Event Values are for a fiscal year that differs from the calendar year, a good rule of thumb is to select the year that includes the most months. For example, if a fiscal year begins April 1, 2022 and ends March 31, 2023, choose 2022 for the Data Year and Dollar Year as most of the impact occurs in 2022. If a fiscal year begins July 1st, which is in the middle of the calendar year, then it is up to the analyst which Data Year and Dollar Year to choose for their project.
Once the Dollar Year and Data Year have been chosen, the Event(s) can then be dragged to the appropriate Group.
When projects involve multi-year analysis, multiple Groups may be needed. A separate Group will be required for each year of the project if the values represent different Dollars.
For example, if an analyst has data to model construction of a new restaurant being built in Winston-Salem North Carolina in 2025, the operations of the restaurant will take place the following year in 2026. Two Groups are needed for this analysis. The first Group should have the Data Year set to 2023 since this is the latest Data Year available, with the Dollar Year set to 2025. The construction event will be placed in this Group. The second Group will also have the Data Year set to 2023 but with the Dollar Year set to 2026. The operations event belongs to this Group.
Note that an analyst needs to ascertain whether inflation was included in future year estimates for construction and operations projects. To learn more about setting up multi-year construction projects, read the article Construction: Building the Analysis.
SPECIAL CONSIDERATIONS
When users have their own projections for inflation they want to apply to their project, the Group Data Year and Dollar Year should be set to the same year. This will eliminate any deflators being applied to the Event Values by IMPLAN. On the Results page, the Dollar Year filter should be changed to the same year as the Group Data Year. Users can then download Results and inflate values using their own projections. For more information on how to download Results, read the article Overview of the Results Page.
When users do not have their own projections for inflation, it is recommended to set the Dollar Year as the year of their values and the Data Year to the year the Event is occurring (or most recently available). Users can then change the Dollar Year filter in the Results to display Results in the Dollar Year desired. For example, if a user has historical survey data from 2016, they can set the Group Data Year and Dollar Year to 2016. If the user would like to see Results in 2026 dollars, they can change the Dollar Year filter on the Results page to 2026.
DOLLAR YEAR IN THE RESULTS
The Results page of a Project has a filter that allows users to display the results of the analysis in the user’s preferred Dollar Year. The Dollar Year filter does not change or alter the results of the analysis, it simply inflates or deflates the estimated effects from the selected Data Year.
To change the Dollar Year of the reported Results, click on the arrow to select a year, and then click Refresh to update the Results.
The Dollar Year for Results should be the year users want to report their Results. Changing the Dollar Year only changes what Dollar Year the monetary values are displayed in, not the analysis. For multi-year projects, users can report Results in a single dollar year to sum across time. The report should state the Results are the sum of the Impacts and reported in the chosen Dollar Year. If a user has their own projections for inflation, set the Dollar Year in the Results to the Data Year of the project. The user can then export the Results and apply their own deflators. As a reminder, this is not the same as forecasting, which makes predictions about future changes to production.
RELATED ARTICLES
Written May 13, 2025